Rayovac 2006 Annual Report Download - page 103

SPECTRUM BRANDS | 2006 ANNUAL REPORT 91
Certain affi liates of Thomas H. Lee Partners, L.P. were the
majority shareholders of United as of immediately prior to the
consummation of the Company’s acquisition of United, and as a
result of the Company’s acquisition of United, are signifi cant
shareholders of the Company. In addition, two of the Company’s
directors are members of Thomas H. Lee Advisors, LLC, which
is the general partner of Thomas H. Lee Partners, L.P., which is
the manager of THL Equity Advisors IV, LLC, which, in turn, is
the general partner of each of the Thomas H. Lee related funds
that were shareholders of United immediately prior to the
Merger and now are signifi cant shareholders of the Company.
The Company’s CEO and trusts for his family members, col-
lectively owned approximately 203 shares of United common
stock as of immediately prior to the Merger, which shares were
converted into an aggregate of approximately 36 shares of Company
Common Stock pursuant to the Merger. The CEO was a member
of the Board of Directors of United from January 20, 1999 to
December 31, 2003 and provided consulting services to United
under an agreement that was terminated on September 28, 2004.
A member of the Company’s Board of Directors is an investor in
Thomas H. Lee Equity Fund IV, L.P., a large shareholder of United
immediately prior to the Merger, and, as a result of the Merger,
currently is a large shareholder of the Company.
In connection with the acquisition of United, the Company
entered into certain agreements with UIC Holdings, L.L.C.
(“Holdings”), the majority stockholder of United as of the date
the Company entered into the defi nitive agreement to acquire
United, Thomas H. Lee Partners, L.P. and certain of its affi liates
and certain former stockholders of United. The agreements are
described further below.
On February 7, 2005, the Company entered into a registra-
tion rights agreement (the “Registration Rights Agreement”)
with certain former stockholders of United, including certain
affi liates of Thomas H. Lee Partners, L.P. and an affi liate of Banc
of America Securities LLC, pursuant to which the Company
agreed to prepare and fi le with the SEC, not later than nine
months following the consummation of the acquisition of United
on February 7, 2005, a registration statement to permit the pub-
lic offering and resale under the Securities Act of 1933 on a con-
tinuous basis of shares of Common Stock issued in connection
with its acquisition of United (the “Shelf Registration Statement”).
Pursuant to the Registration Rights Agreement, the Company
also granted to the former stockholders of United certain rights
to require the Company, on not more than three occasions, to
amend the Shelf Registration Statement or prepare and fi le a new
registration statement to permit an underwritten offering of
shares of the Company’s stock received by them in the acquisi-
tion of United as well as certain rights to include those shares in
any registration statement proposed to be fi led by the Company.
On February 7, 2005, the Company entered into a standstill
agreement (the “Standstill Agreement”) with Thomas H. Lee
Equity Fund IV, L.P., THL Equity Advisors IV, LLC, Thomas H.
Lee Partners, L.P. and Thomas H. Lee Advisors, L.L.C. (the
“Restricted Parties”). Pursuant to the Standstill Agreement, the
Restricted Parties are prohibited until February 7, 2010 from
acquiring ownership in excess of 28% of the Company’s out-
standing voting capital stock, on a fully-diluted basis, soliciting
proxies or consents with respect to the Company’s voting capital
stock, soliciting or encouraging third parties to acquire or seek
to acquire the Company, a signifi cant portion of the Company’s
assets or more than 5% of the Company’s outstanding voting cap-
ital stock or joining or participating in a pooling agreement, syn-
dicate, voting trust or other similar arrangement with respect to
the Company’s voting capital stock for the purpose of acquiring,
holding, voting or disposing of such voting capital stock.
The Company is the lessee of several operating facilities from
Rex Realty, Inc., a company owned by certain of the Company’s
stockholders and operated by a former United executive and past
member of United’s Board of Directors. These affi liate leases
expire at various dates through December 31, 2010. The
Company has options to terminate the leases by giving advance
notice of at least one year. The Company also leases a portion of its
operating facilities from the same company under a sublease agree-
ment expiring on December 31 each year with minimum annual
rentals of $700. The term of the sublease agreement shall automat-
ically be extended on a year-to-year basis from January 1 through
December 31 of each year through and until December 31, 2010,
unless either party elects to terminate such year-to-year extension
by giving termination notice in which case, the term shall termi-
nate at the end of the year following the year during which such
termination notice is given.
(16) Restructuring and Related Charges
The Company reports restructuring and related charges associ-
ated with manufacturing and related initiatives in cost of goods
sold. Restructuring and related charges refl ected in cost of goods
sold include, but are not limited to, termination and related costs
associated with manufacturing employees, asset impairments relat-
ing to manufacturing initiatives and other costs directly related to
the restructuring or integration initiatives implemented.
The Company reports restructuring and related charges
relating to administrative functions in operating expenses, such
as initiatives impacting sales, marketing, distribution or other
non-manufacturing related functions. Restructuring and related
charges refl ected in operating expenses include, but are not lim-
ited to, termination and related costs, any asset impairments
relating to the functional areas described above and other costs
directly related to the initiatives implemented. Restructuring
and related charges are not refl ected in the segment disclosures
included in Note 13, Segment Information.
2006 Form 10-K Annual Report
Spectrum Brands, Inc.